TLDR
- Bernstein picked Tencent, Alibaba, NetEase and Boss Zhipin as favorites in China’s internet sector, citing AI progress.
- The firm says the market undervalues Tencent’s AI work, including Workbuddy and Hy4.
- Bernstein cut its Alibaba price target but kept an Outperform rating.
- Alibaba’s latest revenue rose 8.6% to $39.64 billion, but earnings per share missed estimates.
- Tencent is reportedly in talks to buy SuperPlay for up to $1.5 billion.
Bernstein has shared its top picks in China’s internet sector. The research firm says these companies are building up their artificial intelligence tools even as shoppers in China spend cautiously.
The firm called the sector frustrating because of weak consumer sentiment. It still sees AI as a source of returns for the companies it favors.
Bernstein also likes online jobs platform Boss Zhipin and game maker NetEase. It said both have “idiosyncratic” business drivers.
What Bernstein Says About Tencent
Bernstein thinks the market undervalues Tencent’s AI work, including its Workbuddy and Hy4 platforms. It also sees option value in personal agents.
Tencent Holdings Limited, TCEHY
The firm said Tencent is earning solid AI returns from its advertising and gaming businesses. This comes even as its chatbot work faces scrutiny.
Bernstein says Tencent still offers a positive risk-reward profile for investors.
Tencent is reportedly in talks to buy mobile gaming studio SuperPlay for up to $1.5 billion. The deal has not been confirmed.
The company also bought $200 million of Bilibili’s convertible senior notes. It launched a mobile payment app called TenPayGo for international visitors.
Alibaba Ratings and Share Data
Bernstein expects Alicloud growth to keep beating forecasts. It recently cut its Alibaba price target but kept an Outperform rating.
The firm says Alibaba can still earn good returns on its spending, despite investor worries about a $10.2 billion share sale. It added that investors may want proof that agentic AI can lift merchandise sales and marketing revenue.
Alibaba insiders have been buying shares. Founder Jack Ma bought more than HK$600 million in stock, and Chairman Joe Tsai also added to his stake.
Alibaba last reported earnings on August 14. Revenue was $39.64 billion, up 8.6% from a year earlier and above the $39.52 billion estimate. Earnings per share were $1.26, below the $1.94 forecast.
Other firms have updated their views. Citigroup raised its target to $193 from $190 with a buy rating, and Jefferies kept a buy rating with a $192 target.
Nomura cut its target to $178 from $207. Erste Group Bank raised its FY2028 earnings estimate to $8.42 per share from $8.41.
MarketBeat data shows a Moderate Buy consensus and an average price target of $182.89. Two analysts rate the stock Strong Buy, 13 rate it Buy and six rate it Hold.
Alibaba shares opened at $110.64 on Tuesday. Over the past year, the stock has traded between $91.99 and $182.50.
NetEase closed at $123.73 on October 14. It was trading at $125.11 in premarket on Thursday.
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